Which of the following is true of the relationship between price and marginal cost under monopolistic competition?
a. P = MC at all levels of output
b. P = MC only at the profit-maximizing quantity
c. P > MC at the profit-maximizing quantity
d. P < MC at the profit-maximizing quantity
e. P < MC at the quantities below the profit-maximizing quantity
QUESTION 2Competing-interest legislation is characterized by
a. concentrated costs and concentrated benefits
b. concentrated benefits and widespread costs
c. widespread benefits and widespread costs
d. widespread benefits and concentrated costs
e. zero costs
QUESTION 3In which of the following market structures is a firm most likely to advertise extensively and fear entry of new firms?
a. perfect competition
b. pure monopoly
c. monopolistic competition
d. oligopoly
e. both perfect competition and monopolistic competition
QUESTION 4Special-interest legislation is characterized by
a. concentrated costs and concentrated benefits
b. concentrated benefits and widespread costs
c. widespread benefits and widespread costs
d. widespread benefits and concentrated costs
e. zero costs
QUESTION 5Which of the following is inconsistent with the model of perfect competition?
a. ease of entry into an industry
b. ease of exit from an industry
c. many buyers and sellers in the industry
d. advertising of product differences in the industry
e. a horizontal demand curve facing each firm in the industry
QUESTION 6Special-interest groups, such as the pharmaceutical lobby, often get what they demand because
a. politicians are rationally ignorant
b. voters are rationally ignorant
c. they engage in logrolling
d. they represent the median voter
e. none of the above
QUESTION 7Excess capacity is defined as the difference between a firm's maximum possible output and its actual output.
a. True
b. False
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